Keeping the Cookie Jar Full During Early Retirement

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As we’ve been taught to do, I mostly ignored the money I was setting aside for retirement while I was working. In theory, I claimed to understand the mechanics of what was happening with it every two weeks. But in reality, it made about as much sense to me as supply-side economics. And just like I am now with the new tax plan here in the U.S., I was surely unsure how it would all eventually trickle down to me. I understood that it was my money, but I literally had no idea how or when I would get my grimy hands on it.

Which is why a recent Sunday Guest Post here on Donna’s blog caught my attention. Written by Lynn from Encore Voyage, she tells her story of retiring from a long career in teaching, followed by an unplanned termination of her husband’s job. It sounds like it was a scary situation for them, at least in the short term. Everyone wants to make sure they’ve dotted all their I’s and crossed all those T’s prior to taking the retirement plunge. To paraphrase Art Linkletter, retirement planning isn’t for the faint of heart.

One passage in Lynn’s post spoke to me directly (emphasis mine):

“We were not old enough to officially ‘retire,’ and we hadn’t been taking specific steps to do so. While we had spent a lifetime saving for retirement, and we knew we would be okay financially, we were unprepared for about a zillion changes that happen when you suddenly become retired.”

I can relate to that completely because my own ‘retirement’ was surprisingly quick and somewhat haphazard. In hindsight, I now characterize that period as controlled confusion.

I took early retirement four months shy of my 56th birthday. I had just been through a rather quick medical odyssey, the results of which were both inconclusive but thankfully positive. At the same time, my employer dangled an early retirement and buyout offer to eligible staff. Although I had been eligible for similar offers in prior years, this time around the timing seemed right to take it. There were other horizons to explore.

I had done very little in the way of retirement planning. But like Lynn and her husband, I too had been diligently saving. My goal each year was to sock away a higher percentage of my salary into my 401(k) plan than the previous year. A divorce four years earlier forced me to partition a percentage of it for my ex-wife. My response to that was to increase contributions to make-up for the loss. By the time I made the early retirement decision, I had managed to recover and even add to what the court-ordered decree had removed. In fairness, a post-recession bull market helped my efforts tremendously.

A little over three years later, this retirement experiment has blossomed into a very satisfying next phase for us. Thanks to my wife Gorgeous’ full-time business, my part-time job, and a small pension that I receive from my former employer, we settled into a Florida condo which we purchased earlier this year.

My money in the 401(k) plan continues to sit on autopilot. I log in every week to check on its performance. Once a year, during the month of January, I review and re-balance everything so that all funds are back to their pre-determined allocations. Distributions from it are still a few years away from starting.

Gorgeous had no savings prior to our getting married, and she’s now on a mission late in life to build her own retirement fund. It’s really never too late to start.

The most important part for us is that we have figured out a way forward without dipping into the cookie jar.

From Retirement Reflections: Have you noticed that there are numerous ‘essentials’ of retirement that I never seem to write about on this blog? That is one reason that I am so grateful to all Guests Hosts for generously sharing their experience, passions and expertise. Thank you to Marty for being the first on this blog to directly tackle the fundamental subject of retirement savings. To read more of Marty’s thoughts on pensions, social security, 401(k)s, alimony, politics, current events, music, and…life’s comical ironies head over to his blog at Snakes in the Grass. Adding her expertise to another area that I typically neglect in my writing is Linda from Boots, Shoes and Fashion. Please join us next week when Linda, who is usually acting as ‘interviewer’ on her website, switches seats and shares a bit of her own story with us. I hope that you will join us then!

Hi, Cathi – I agree that there is much to think about in terms of retirement savings and retirement spending. As Marty effectively stated, by sticking to a plan it is quite doable…and ‘catch-up savings’ are very possible! Thanks for commenting. I greatly appreciate it.

My retirement followed my husband’s by about 3 years. I had planned and deferred it (mostly because I enjoyed my job but there is that gnawing factor of no steady paycheck). I have been retired 6 years and so far we’ve been lucky. We haven’t had to dip into savings…yet. I have a background fear about running out of money (one catastrophic illness can wipe you out!) although I don’t focus on it. Some of the things that happened after retirement that I didn’t know is that Medicare is neither free nor inexpensive. I pay more for healthcare now than I did when I was employed and that coverage was better. Although the inflation numbers remain low, the items I buy increase at astronomical rates. Vet costs, medications, consumer supplies all increased at a higher rate than the inflation rate would indicate. Despite being in a new home built in 2003, we have replaced ALL appliances at least once and they are much more expensive. (They don’t make them like they used to!) There is a good side though. I don’t need clothes and my car costs are lower. There is no point in worrying but there is knowledge that at some point, things may be different. In the meantime I will enjoy where I am now.

Really great information, Kate. It’s true that none of us really understand just how much health care costs in retirement. I too thought Medicare was free! And yes, all those costs in running a home are still there in retirement. Your “good” sides are worth highlighting, though. Many other things (such as clothes) are simply not on the cost radar anymore.

Hi, Kate – You make excellent points here. There are definite retirement costs that I hadn’t counted on (or hadn’t counted on to this extent). But like you, there are many areas where I no longer need to spend (or don’t need to spend much). Thank you for adding this detailed comment here. I wish that I had been reading posts like this long before my retirement. It is very helpful to learn from others who have come before us, or who are experiencing a similar situation. 🙂

Thanks, Marty, for sharing your experience. It’s helpful to learn from others who have been there. Just like any journey, the early retirement journey certainly requires a lot of thinking and planning, both financially, and non-financially. On the financial side, I did a year-long experiment living and tracking the essential expenses, plus some cushion for ’emergencies’. It gave me confidence to leave full-time work. Thanks, Donna, for another great guest post.

Hi, Natalie – Doing an ‘experiment’ ahead of time is a brilliant idea. I agree that both concrete knowledge and confidence surrounding the decision to retire are essential. Otherwise we worry daily about being ‘bag people’ – which can really kill the retirement vibe!

Hey Marty,
We are quite similar. I too spent my whole life saving for retirement, retired early without any real plans, and am not yet tapping into retirement plans. Hubby is however tapping into his (pension and SS) so I guess as a couple we are. But we have not tapped into our savings yet (dividends yes, savings no), so that has helped me in easing the worry about long term finances. Yes, there is an underlying Bag Lady Syndrome there!

I’ve also realized that we are spending more in retirement than we did previously – buying a house and decorating as I wanted to, traveling more, actually buying more healthy food, health care costs. Luckily the mortgage payments will be done quite soon, so that will resolve monthly cash flow quite a bit.

BTW – According to the US government (I looked it up a while back), being classified as retired requires two things: 1) working less than full time AND 2) tapping into retirement-like income (social security, pension, 401K, etc.). So according to them, I’m not retired, but hubby is. Ironic since I left my MegaCorp as a retiree while he just had enough and quit. I also think this is funny and sometimes say I’m not retired, just not working!

Hi, Pat. That’s really interesting that the government has that definition (I had no idea). I too then fall into a category of officially not being retired, although in fact I haven’t really thought I was yet anyway. I will start drawing from my 401(k) in four years when I turn 62, but I’m holding off on Social Security till slightly beyond my full eligibility (66 and 10 months). So I guess in four years I can officially be “retired,” though even then I hope to keep the part-time job. It’s all about balance, I suppose. Or bag lady/man syndrome if you will. 🙂

At the moment we are definitely spending more because of our need to furnish our new home, plus make some fixes to it. So long as my wife works full time we can do this. My diabolical plan is to keep her working for as long as possible!

Hi, Pat – I chime in with Marty in thanking you for your detailed comments. I greatly appreciate you taking the time to share this. According to the US Government’s definition I am not ‘officially retired’ either. But I do embrace that label – and (shamelessly) shout it out as much as possible (just to remind myself that I truly am no longer working). 🙂

Thanks for sharing your experience with us, Marty. In my early 20’s, my father taught me the importance of a 401K, contributing to it and not touching it. Fortunately, after 30 years, I’m in good shape. That said, living with Crohn’s Disease and infusions that cost 15k a pop, retiring and giving up my excellent employer provided health insurance, seems rather scary. Thanks so much for hosting Marty, Donna. This is great information for everyone.

Hi, Jill. Thanks for briefly sharing your story here. Leaving retirement savings alone and allowing them to just grow is probably the most important facet of retirement. Just today I read a Washington Post article that talked about how people are finding all kinds of ways to raid these tax-sheltered savings for vacations, boats, etc. In addition to paying penalties on early withdrawal, they are endangering their futures. The path you followed is the safest and the smartest.

I am sorry for your health challenges. I do hope that for your sake and so many others that Medicare isn’t “reformed” in such a way that we lose precious coverage that we paid for ahead of time. Hang tough… and thank you so much for your comments.

Hi Marty and Donna! Thanks for the reminder that it is never too late to start planning for the future. We are all so individual so it is important for us to learn from one another about different options and ways to make it work. And yes, health issues can change everything. Good luck in the future with your ongoing plans. ~Kathy

Thanks, Kathy! Indeed it is never too late. The power of dollar cost averaging is that you can build a nest egg with regular contributions. It doesn’t take a mathematician to understand that, and believe me, I am far from that! 🙂

We all have different paths we’ve taken to the land of retirement. Both my husband and I – even independently, before we met – are good savers so we felt pretty comfortable financially when we decided to retire. With the economy doing well in recovery since the crash, we’ve watched our nest egg grow, even though we no longer have paychecks adding to our savings. But, what goes up can – and will – come down so we don’t delude ourselves that the upwards momentum will last forever. So, we continue to enjoy simple pleasures and take care of our health, understanding that those decisions can help us weather just about any storm. We haven’t had to dip into the cookie jar yet, but I hope there are plenty of oatmeal raisin cookies in there when we do!

You hit a point about the market that I would have normally gotten into on my own blog, Janis. But since this was a guest post, I kept things concise. Yes absolutely, though, market conditions have huge — some might even say “grave” — influence over our savings now. The current bull market is starting to tear away at my confidence a bit, and I almost wish a correction would come sooner rather than later. But these things, of course, are out of our control. So we make plans accordingly to cushion the blows. Many thanks for your sage input.

Hi Marty, there was a time in Australia where you could be confident about your retirement plan and savings. However, these days even when you think you have it all planned out, something from left field throws the plan out of the window. We are financially comfortable but it is only because we make choices in our life. We recognise we can’t do or have it all so it is a matter of choosing what means more to our quality of life.

Hi, Sue – I agree that making wise choices that are right for each individual is an essential life skill — especially during retirement. Thank you for stopping by and commenting. I greatly appreciate it.

I think most people have some doubts whether they have ‘enough’ when they retire. I know I did. The past 7 years have been an adjustment to a new budget and different spending behaviours.

The problem comes with getting together with other people who are either in retirement or near it. The inevitable comparisons start of what everyone is and isn’t doing. That’s when the doubts start to creep in … am I spending too much? Did I really save enough after all?
In the end, I have to remind myself to simply stay the course as planned. It’s a good plan for us – for now 🙂

It’s a definite land mine in discussions, Joanne. I’ve learned the hard way not to get too specific with friends (and especially family) because everyone has different attitudes and experience with money. One of my closest friends and I discuss retirement savings probably on a weekly basis in e-mails, but we have an unspoken rule that we never get into specifics about what each of us have.

This current bull market makes me nervous about my own allocation mix, but in the end I think I have no real chose but to just “stay the course,” as you put it.

Hi, Joanne – ‘Comparison with others’ is frequently referred to as ‘The Happiness Killer’. I like your advice about preparing the best individual plan that you can and being confident with that. (And as Marty advises above, building into that plan something to cushion ‘unexpected blows’). Thank you for sharing this.

Hey, Marty ( and Donna), thanks so much for the shout out! What a great post, full of information! Like most of the other comments here, we, too, have avoided dipping into our “retirement savings.” And the “Trump bump” has been exciting as the value of our investments soar. As for us, the next great news is that Jeremy has hit that magic age of 59 1/2, where he is able to make withdrawals from our IRAs. (I’m not too far behind…) The problem is, we don’t want to! We still have a couple of side hustles and part time gigs going on, and we keep trying to add to, or at least maintain all of our accounts. The really difficult next step comes when we all move from “accumulation” to “distribution” – Time will tell how difficult that will be! Thanks again ~ Lynn

Hi, Lynn – I love how bloggers inspire other bloggers — in fact, that’s one of my all-time favourite things about blogging.
Thank you for being the inspiration for this important topic. Marty’s post has already inspired many diverse and insightful comments.

Thanks for the inspiration for something to contribute, Lynn. When Donna initially asked me, the “post well” was dry until I read your post. Then the proverbial light bulb thankfully flicked on. Bloggers do inspire bloggers!

At the moment, my plan is to start distributions from my 401(k) at 62, which is the same time that a supplemental I receive in my pension will end. But if I can delay it for a handful of years, I will. It can all get rather tricky to time these things right, and keeping one’s health is the most important aspect to protecting the cookie jar.

This blog was timely for me, as I just scheduled a personal session with an advisor from my pension plan to review my plans for an early retirement. I’ve been putting away as much as I can in a 401(k) for years now, and I am lucky to have a pension program as well. However, I’ve no idea if I’ve done enough to make my hopes for retirement realistic. Of course, health insurance is a big consideration as well. So much to think about! I appreciate reading about all of your experiences.

Christie, you’re already way ahead of where I was at the same time. I had one indirect meeting a year or two prior to my retiring with a financial consultant. But it was mostly a high-level view only. When the time finally came, most of my decisions were seat-of-the-pants ones, which I don’t recommend to anyone. Fortunately my fundamental were all good (pension, saving, health insurance, etc.), but in hindsight I still took some risks. So kudos to you for starting now to really plan. Good luck!

Thanks for posting on this topic, Marty. I have found the blogging world to be a tremendous resource in planning for both the financial and non financial aspects of retirement. As a frugal person by nature who has always been oriented to saving, I sometimes find it hard to feel okay about spending any of my accumulated retirement savings.

Hi, Jude – Thank you for dropping by. I wholeheartedly agree that fellow bloggers can be a tremendous resource regarding a large variety of topics. It was retirement planning/dreaming that originally lead me to begin reading blogs!

I guess there are two main categories of people: the ones that save and the ones that don’t. I have always been in the first group, wanting to put aside whatever I didn’t need. Never having been in debt made that easy. My problem, however, is that I haven’t worked a normal job for a very long time, meaning there is not much money coming in to put aside. The way I solve(d) this, is by not spending a lot of money.

Because of my lifestyle, I can’t think about retirement. Ever. Retirement from what? People have often asked me whether I’m worried about the future. Not yet. Mark and I do manage to set aside whatever we don’t use and he has been putting a lot in his retirement account, ever since he found his first job. The way I see it: the less you spend, the less you need to earn. I figure I could keep that system up for a while longer. 🙂

Hi, Lisbet. Certainly another reason why “reforming” Social Security would hurt someone who’s played by all the rules and has saved. Whatever you have saved up, I do hope that it will be enough to help supplement your later Social Security income to fund a lifestyle that enables you to keep a roof over your head, food in your fridge, and the chance to get out and enjoy life. It sounds like you’re way ahead of most Americans.

Marty, sounds like you got the good outcome, despite the uncertainty! 21 years ago, while still working, I had to pay my ex a portion of my pension (through CalPERS–California public employees). Once I did that then retired at 55 (after 32 years with the same org), I continued my part-time university lecturer job which I have been doing for 7 years. Hubby still works for at least another 9 years, by then we will both be 67 and can at least get decent social security if it still exists. By then the house and other debts will be mostly paid off. There is so much to think about in retirement–you brought up great points and that it is never too late!

Hi, Terri – Thanks so much for stopping by. You make a excellent point that each of our situations is unique. And that even when we have a solid plan in place…something unforeseen can always arise. I, too, like Marty’s advice that it is never too late.
Thanks for sharing this.

Hi, Terri. I didn’t actually cry when that portion of my pension was cut, but it was certainly a melancholy moment, and I’m sure you felt the same. Divorce is always more about the emotional trauma we face, but at the same time there are so many financial challenges too. That you continued putting away savings, and now even have that part-time job, you’re doing all you can to re-build and preserve. Good for you! Thank you so much for sharing your story.

I almost retired last year but postponed it when I was able to secure a part time position. I am trying to avoid dipping into my savings as long as possible because I plan to live a long life and expect to need it! It is a fine balance because waiting too long may make me miss out on some fun after I’ve worked so many years to save. It is hard to change that mind set and give myself permission to use the money. Thought provoking post about the realities of retirement.

I agree, Molly. I have an older sister with no children and double the retirement savings I have. She’s not touching her savings out of fear, and thus missing out on so much because of that. Good luck to you!

Oh, thank you for this. I thought I was the only one who could not make heads or tails of the 401K process. I just kept adding to it and added any raise percentage I received into it. I also did not realize Medicare is not free. Many awakenings. But, I have learned how to shop wisely and live more frugally. So we are still on course.
Thanks Again
Laura

Hi, Laura. My wife had a very similar misconception about Medicare too. To be fair, most Americans younger than 65 do! Let’s just hope and pray that the upcoming “reforms” to it are gentle. Many thanks for your comments, and I’m glad to hear you’re on course.

Hello there Marty and Donna! Thanks for sharing your experiences and insights with us Marty. I’m happy to read that you have saved hard for your retirement. I admire your courage of retiring without delving much into planning. You are adventurous. But I am worried about the what-ifs of uncertainties. What if healthcare issues strike, I am hoping you have considered it. I don’t know if you already have Medicare, but have you considered Medigap supplements or advantage plans? Healthcare expenses make me worry; I don’t want to spend much of my savings to sustain that need, I’m sure you do too.

Hi, Leandro. Many thanks for your comments. You raise an important point about healthcare, and it’s certainly one aspect I should have at least mentioned in passing in this guest post Being a guest on Donna’s blog, I wanted to be concise so as not to overstay her invitation!

To answer your question, I am fortunate that my retirement package allows my wife and I to remain on the same health insurance plan, up to and including my eventually getting on Medicare. So it will be its own “Medigap” policy, so to speak. I have to pay for it, of course, but it works in a similar fashion. Without this, I would *not* have been able to take the early retirement offer. Taking this coverage into retirement was the primary engine for me. I wish you well on your own journey!

Great to hear that, Marty! You are fortunate to have that coverage for you and your wife. Yes, you are correct, that coverage you have right now is a good sort of “Medigap plan”. Thanks for your good wishes. Good luck and wish you all the best. 🙂

Hi, Leandro – I agree that preparing for the unexpected is an essential part of retirement planning. As Marty has stated, ‘making plans accordingly to cushion the blows” is important. Thank you for dropping by and commenting.

Fantastic conversations here! I think these kind of ‘shares’ of what we’ve done, how we feel about retirement and finances, are helpful to all. My guy says he’ll never retire – he plans on us living until we’re 92 (yup, 92) and wants to make sure we never have to drain our kids’ finances to keep us going. But what happens to those who DO suddenly need to retire? We have good friends who were shocked when the Mr. was ‘let go’ in his late 50s because the large company he worked for sold his department. He had plenty of savings – I mean, plenty – but he still nosedived into a depression. He had no idea what to do with himself, and felt useless. That’s another part of retirement. Another friend told me he didn’t ‘retire from’ a job. He’s retired ‘TO’ another phase in his life, another way to participate in all that interests him. I say “YAY” to that.

Hi, Pamela – I agree that comments/stories shared through blogging can be very insightful, inspiring and incredibly helpful. Thank you for joining this conversation and sharing your story. Your partner plans to work until at least 92? Very impressive!

Another great guest post Donna and Marty. Thanks for sharing your experience and starting the conversation we all like to ignore (or at least keep private). There’s a lot to consider when thinking about retirement and as we are all living longer we need to be prepared for a long retirement. A great array of comments too which indicates it’s a very important subject. Thanks 🙂

Hi, Debbie – Thanks for commenting. I agree that this is a topic that many of us (me included) like to ignore. Marty made excellent points. I liked his reminder that it is never too late to start saving for retirement.

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Prior to retirement, I lived and worked in Beijing China for fourteen years (Middle School Principal/Deputy Director at The Western Academy of Beijing). Leaving international life behind, my husband and I retired to Vancouver Island in June 2015. To document both this transition and our new adventures, ‘Retirement Reflections’ was born. I hope that you enjoy these reflections, and will be willing to share your own.